Recently, Kuang Zhonghong, lecturer of the School of Economics, Renmin University of China (RUC) published an article, entitled “Optimal prize design in team contests with pairwise battles” on Journal of Economic Theory, a leading journal in the field of economic theory. 

Another three authors are Feng Xin from the School of Economics, Nanjing University, Jiao Qian from the Lingnan College, Sun Yat-sen University and Lu Jingfeng from the Department of Economics, National University of Singapore.

Prof Liu’s research interests mainly include Game theory, information economics, and industrial organization theory. His research results have been published on journals such as Journal of Economic Theory and so on.

Abstract

This paper studies the effort-maximizing design of a team contest with an arbitrary number (odd or even) of pairwise battles. In a setting with full heterogeneity across players and battles, the organizer determines the prize allocation rule (or the winning rule of an indivisible prize) contingent on battle outcomes. We propose a measure of team's strength, which plays a crucial role in prize design. The optimal design is a majority-score rule with a headstart score granted to the weaker team: All battles are assigned team-invariant scores, the weaker team is given an initial headstart score which is the difference in strengths between teams, and the team collecting higher total scores from its winning battles wins the entire prize. The optimal rule resembles the widely-adopted Elo rating system.

For more details, please refer to https://doi.org/10.1016/j.jet.2023.105765.